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Nov. 10, 2021, 8:04 a.m. EST

10-Q: LIPOCINE INC.

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(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes thereto and other financial information included elsewhere in this report. For additional context with which to understand our financial condition and results of operations, see the management's discussion and analysis included in our Form 10-K, filed with the U.S. Securities and Exchange Commission ("SEC") on March 11, 2021, our first quarter Form 10-Q filed with the SEC on May 6, 2021, our second quarter Form 10-Q filed with the SEC on August 5, 2021, as well as the financial statements and related notes contained therein.

As used in the discussion below, "we," "our," and "us" refers to Lipocine.

Forward-Looking Statements

This section and other parts of this report contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and

Overview of Our Business

We are a clinical-stage biopharmaceutical company focused on applying our oral drug delivery technology for the development of pharmaceutical products focusing on metabolic and endocrine disorders. Our proprietary delivery technologies are designed to improve patient compliance and safety through orally available treatment options. Our primary development programs are based on oral delivery solutions for poorly bioavailable drugs. We have a portfolio of proprietary product candidates designed to produce favorable pharmacokinetic ("PK") characteristics and facilitate lower dosing requirements, bypass first-pass metabolism in certain cases, reduce side effects, and eliminate gastrointestinal interactions that limit bioavailability.

Our most advanced product candidate, TLANDO(R), is an oral testosterone replacement therapy ("TRT") comprised of testosterone undecanoate ("TU"). On December 8, 2020, we received tentative approval from the United States Food and Drug Administration ("FDA") regarding our new drug application ("NDA") filed in February 2020 for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. In granting tentative approval, the FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not received final approval and is not eligible for final approval to market in the U.S. until the expiration of the exclusivity period previously granted to Clarus Therapeutics, Inc. ("Clarus") with respect to Jatenzo(R), which expires on March 27, 2022. The FDA has affirmed that the resubmission of the NDA for TLANDO will be a Class 1 resubmission. A Class 1 NDA resubmission includes a two-month FDA review goal period. On October 14, 2021, we entered into a license agreement (the "Antares License Agreement") with Antares Pharma, Inc. ("Antares"), pursuant to which we granted to Antares an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize, upon final approval of TLANDO from the FDA, our TLANDO product with respect to TRT in the U.S. We and Antares remain committed to taking appropriate actions with the goal of receiving final approval to permit the launch of TLANDO. The FDA has also required us to conduct certain post-marketing studies to (i) assess patient understanding of key risks relating to TLANDO and (ii) evaluate development of adrenal insufficiency with chronic TLANDO therapy which will be conducted and paid for by Antares.

Additional pipeline candidates include LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU for the treatment of non-cirrhotic non-alcoholic steatohepatitis ("NASH") which is currently in Phase 2 testing, TLANDO(R) XR, a next generation oral TRT product comprised of testosterone tridecanoate ("TT") with the potential for once daily dosing which has completed Phase 2 testing, LPCN 1148 comprising a novel prodrug of bioidentical testosterone, testosterone laurate ("TL"), for the management of symptoms associated with cirrhosis, LPCN 1154, an oral neuro-steroid targeted for the treatment of postpartum depression ("PPD"), and LPCN 1107, potentially the first oral hydroxy progesterone caproate ("HPC") product indicated for the prevention of recurrent preterm birth ("PTB"), which has completed a dose finding Phase 2 clinical study and has been granted orphan drug designation by the FDA.

LPCN 1144 is currently being tested in an open label extension ("OLE") study to the Liver Fat intervention with oral Testosterone ("LiFT ") proof-of-concept ("POC") Phase 2 clinical study, a paired-biopsy study in confirmed non-cirrhotic NASH subjects. Positive top-line primary endpoint results after 12 weeks of treatment in the LiFT clinical study were released in January 2021. Treatments with LPCN 1144 resulted in robust liver fat reduction, assessed by magnetic resonance imaging, proton density fat fraction ("MRI-PDFF") technique, and showed improvement of liver injury markers with no observed tolerability issues. Additionally, key secondary endpoint results after 36 weeks of treatment in the LiFT clinical study were released in August 2021. Treatments with LPCN 1144 met the non-alcoholic steatohepatitis ("NASH") resolution regulatory endpoint, showed positive effects in appendicular lean mass and whole-body fat mass and continued to show substantial reductions in markers of liver injury compared to placebo.

To date, we have funded our operations primarily through the sale of equity securities, debt and convertible debt and through up-front payments, research funding and royalty and milestone payments from our license and collaboration arrangements. We have not generated any revenues from product sales and we do not expect to generate revenue or royalties from product sales unless and until we obtain regulatory approval of TLANDO or other products.

We have incurred losses in most years since our inception. As of September 30, 2021, we had an accumulated deficit of $185.3 million. Income and losses fluctuate year to year, primarily depending on the nature and timing of research and development occurring on our product candidates. Our net loss was $13.3 million for the nine months ended September 30, 2021, compared to $16.5 million for the nine months ended September 30, 2020. Substantially all of our operating losses resulted from expenses incurred in connection with our product candidate development programs, our research activities and general and administrative costs, including recently settled litigation, associated with our operations.

We expect to continue to incur significant expenses and operating losses for the foreseeable future as we:

? complete the OLE clinical study with LPCN 1144;

? conduct further development of our other product candidates, including LPCN







        1144, LPCN 1148, LPCN 1154 and LPCN 1107;
        


? continue our research efforts;

? research new product candidates or new uses for our existing products candidates;

? maintain, expand and protect our intellectual property portfolio; and

? provide general and administrative support for our operations.

To fund future long-term operations, including the potential commercialization of our products, we will need to raise additional capital. The amount and timing of future funding requirements will depend on many factors, including capital market conditions, regulatory requirements related to our other product development programs, the timing and results of our ongoing development efforts, the potential expansion of our current development programs, potential new development programs, our ability to license our products to third parties, the pursuit of various potential commercial activities and strategies associated with our development programs and related general and administrative support. We anticipate that we will seek to fund our operations through public or private equity or debt financings or other sources, such as potential license, partnering and collaboration agreements. We cannot be certain that anticipated additional financing will be available to us on favorable terms, in amounts sufficient to fund our operations or at all. Although we have previously been successful in obtaining financing through public and private equity securities offerings and our license and collaboration agreements, there can be no assurance that we will be able to do so in the future.

Our Product Candidates

Our current portfolio includes our most advanced product candidate, TLANDO, an oral TRT product candidate, which received tentative approval from the FDA on December 8, 2020. Additionally, we are in the process of establishing our pipeline of other clinical candidates including an oral androgen therapy for the treatment of non-cirrhotic NASH, LPCN 1144, a next-generation potential once daily oral TRT, TLANDO XR, an androgen therapy for the management symptoms associated with cirrhosis, LPCN 1148, an oral neuro-steroid targeted for the treatment of PPD, LPCN 1154, an oral therapy for the prevention of recurrent PTB, LPCN 1107, and we continue to explore other product candidates targeting indications with a significant unmet need. On October 14, 2021, we entered into the Antares License Agreement with Antares, pursuant to which we granted to Antares an exclusive, royalty-bearing, sublicensable right and license to develop and commercialize, upon final approval of TLANDO from the FDA, our TLANDO product with respect to TRT in the U.S. The Antares License Agreement also provides Antares with an option, exercisable on or before March 31, 2022, to license TLANDO XR.

These products are based on our proprietary Lip'ral drug delivery technology platform. Lip'ral technology is a patented technology based on lipidic compositions which form an optimal dispersed phase in the gastrointestinal environment for improved absorption of insoluble drugs. The drug loaded dispersed phase presents the solubilized drug efficiently at the absorption site (gastrointestinal tract membrane) thus improving the absorption process and making the drug less dependent on physiological variables such as dilution, gastro-intestinal pH and food effects for absorption. Lip'ral based formulation enables improved solubilization and higher drug-loading capacity, which can lead to improved bioavailability, reduced dose, faster and more consistent absorption, reduced variability, reduced sensitivity to food effects, improved patient compliance, and targeted lymphatic delivery where appropriate.

Our Development Pipeline

TLANDO: An Oral Product Candidate for Testosterone Replacement Therapy

Our most advanced product, TLANDO, is an oral formulation of the chemical, TU, which is an eleven-carbon side chain attached to testosterone ("T"). TU is an ester prodrug of T. An ester is chemically formed by bonding an acid and an alcohol. Upon the cleavage, or breaking, of the ester bond, T is formed. TU has been approved for use outside the United States for many years for delivery via intra-muscular injection and in oral dosage form and more recently TU has received regulatory approval in the United States for delivery via intra-muscular injection and in oral dosage form. We are using our proprietary technology to facilitate steady gastrointestinal solubilization and absorption of TU. Proof-of-concept was initially established in 2006, and subsequently TLANDO was licensed in 2009 to Solvay Pharmaceuticals, Inc. which was then acquired by Abbott Products, Inc. ("Abbott"). Following a portfolio review associated with the spin-off of AbbVie Inc. by Abbott in 2011, the rights to TLANDO were reacquired by us. All obligations under the prior license agreement have been completed except that Lipocine will owe Abbott a perpetual 1% royalty on net sales. Such royalties are limited to $1 million in the first two calendar years following product launch, after which period there is not a cap on royalties and no maximum aggregate amount. If generic versions of any such product are introduced, then royalties are reduced by 50%.

NDA PDUFA Outcome

On December 8, 2020 we received tentative approval from the FDA regarding our NDA filed in February 2020 for TLANDO as a TRT in adult males for conditions associated with a deficiency of endogenous testosterone, also known as hypogonadism. In granting tentative approval, the FDA concluded that TLANDO has met all required quality, safety and efficacy standards necessary for approval. However, TLANDO has not received final approval and is not eligible for final approval to market in the U.S. until the expiration of the exclusivity period previously granted to Clarus with respect to Jatenzo(R), which expires on March 27, 2022. The FDA has affirmed that the resubmission of the NDA for TLANDO will be a Class 1 resubmission. A Class 1 NDA resubmission includes a two-month FDA review goal period. We remain committed to taking appropriate actions with the goal of receiving final approval to permit the launch of TLANDO.

Under the Pediatric Research Equity Act ("PREA"), if TLANDO receives full approval, under the terms of the Antares Licensing Agreement, Antares will need to address the PREA requirement to assess the safety and effectiveness of TLANDO in pediatric patients. The FDA has also required us to conduct certain post-marketing studies including: (i) conduct an appropriately designed label comprehension and knowledge study that assesses patient understanding of key risk messages in the Medication Guide for TLANDO and (ii) conduct an appropriately designed one-year trial to evaluate development of adrenal insufficiency with chronic TLANDO therapy which will be conducted and paid for by Antares. The timetables for these post-marketing requirements will be established at the time of full approval of TLANDO.

Upon execution of the Antares License Agreement, Antares paid to us an initial payment of $11.0 million. Antares will also make additional payments of $5.0 million to us on each of January 1, 2025 and January 1, 2026, provided that certain conditions are satisfied. We are also eligible to receive milestone payments of up to $160.0 million in the aggregate, depending on the achievement of certain sales milestones in a single calendar year with respect to all products licensed by Antares under the Antares License Agreement. In addition, upon commercialization, we will receive tiered royalty payments at rates ranging from percentages in the mid-teens to up to 20% of net sales of TLANDO in the United States, subject to certain minimum royalty obligations. If Antares exercises its option to license TLANDO XR, we will be entitled to an additional payment of $4.0 million, as well as development milestone payments of up to $35.0 million in the aggregate and tiered royalty payments at rates ranging from percentages in the mid-teens to 20% of net sales of TLANDO XR in the United States.

Recent Competition Update

On March 27, 2019, Clarus' product JATENZO(R), an oral TU product, was approved by the FDA and also received three years of data exclusivity. On February 10, 2020, Clarus announced that JATENZO(R) has been launched and is commercially available. Based on the FDA's tentative approval of TLANDO, we will not be able to begin marketing TLANDO until receiving final approval no earlier than March 27, 2022, the expiration of the exclusivity period granted to Clarus with respect to JATENZO(R).

Additionally, our competitors may introduce other TRTs. For example, on January 5, 2021 Marius submitted a NDA to the FDA seeking approval of KYZATREX(R), its novel oral TU soft gelatin capsule for the treatment of primary and secondary hypogonadism in adult men. According to Marius, it has been assigned a PDUFA date of October 31, 2021 for KYZATREX(R).

We are also aware of other pharmaceutical companies that have TRTs or testosterone therapies in development that may be approved for marketing in the United States or outside of the United States.

Based on publicly available information, we believe that several other TRTs that would be competitive with TLANDO are in varying stages of development, some of which may be approved, marketed and/or commercialized prior to TLANDO. These therapies include T-gels, oral-T, an aromatase inhibitor, a new class of drugs called Selective Androgen Receptor Modulators and hydroalcoholic gel formulations of dihydrotestosterone ("DHT").

LPCN 1144: An Oral Prodrug of Bioidentical Testosterone Product Candidate for the Treatment of NASH

We are currently evaluating LPCN 1144, an oral prodrug of bioidentical testosterone comprised of TU, for the treatment of non-cirrhotic NASH. NASH is a more advanced state of non-alcoholic fatty liver disease ("NAFLD") and can progress to a cirrhotic liver and eventually hepatocellular carcinoma/ liver cancer. Twenty to thirty percent of the U.S. population is estimated to suffer from NAFLD and fifteen to twenty percent of this group progress to NASH, which is a substantially large population that lacks effective therapy. Currently, there are no FDA approved treatments for NASH, a silent killer that affects approximately 30 million Americans. Approximately 50% of NASH patients are in adult males. NAFLD/NASH is becoming more common due to its strong correlation with obesity and metabolic syndrome, including components of metabolic syndrome such as diabetes, cardiovascular disease and high blood pressure. In men, especially with comorbidities associated with NAFLD/NASH, testosterone deficiency has been associated with an increased accumulation of visceral adipose tissue and insulin resistance, which could be factors contributing to NAFLD/NASH. There is currently no approved therapy for the treatment of NASH although there are several drug candidates currently under development with many having clinical failures to date.

History of Liver Disease

The liver is the largest internal organ in the human body and its proper function is indispensable for many critical metabolic functions, including the regulation of lipid and sugar metabolism, the production of important proteins, including those involved in blood clotting, and purification of blood. There are over 100 described diseases of the liver, and because of its many functions, these can be highly debilitating and life-threatening unless effectively treated. Liver diseases can result from injury to the liver caused by a variety of insults, including hepatitis C virus, hepatitis B virus, obesity, chronic excessive alcohol use or autoimmune diseases. Regardless of the underlying cause of the disease, there are important similarities in the disease progression including increased inflammatory activity and excessive liver cell apoptosis, which if unresolved leads to fibrosis. Fibrosis, if allowed to progress, will lead to cirrhosis, or excessive scarring of the liver, and eventually reduced liver function. Some patients with liver cirrhosis have a partially functioning liver and may appear asymptomatic for long periods of time, which is referred to as decompensated liver disease. Decompensated liver disease is when the liver is unable to perform its normal functions. Many people with active liver disease remain undiagnosed largely because liver disease patients are often asymptomatic for many years.

Markers of Liver Cell Death

Alanine aminotransferase ("ALT") is an enzyme that is produced in liver cells and is naturally found in the blood of healthy individuals. In liver disease, liver cells are damaged and as a consequence, ALT is released into the blood, increasing ALT levels above the normal range. Physicians routinely test blood levels of ALT to monitor the health of a patient's liver. ALT level is a clinically important biochemical marker of the severity of liver inflammation and ongoing liver disease. Elevated levels of ALT represent general markers of liver cell death and inflammation without regard to any specific mechanism. Aspartate aminotransferase ("AST")is a second enzyme found in the blood that is produced in the liver and routinely measured by physicians along with ALT. As with ALT, AST is often elevated in liver disease and, like ALT, is considered an overall marker of liver inflammation.

Relationship between Hypogonadism and NAFLD

Preclinical and clinical studies in the NAFLD/NASH literature have shown the prevalence of testosterone deficiency across the NAFLD/NASH histological spectrum wherein low testosterone was independently associated with NAFLD/NASH with an inverse relationship between testosterone and NAFLD/NASH symptom severity. A recent National Institute of Diabetes and Digestive Kidney Diseases report suggests that 75% of biopsy confirmed NASH subjects have less than 372 ng/dL of total testosterone and that the degree of fibrosis severity is inversely related to free testosterone levels; thus, providing a good rationale for testing LPCN 1144 in adult NASH patients regardless of their hypogonadal status. We have received clearance from the FDA to clinically investigate LPCN 1144 in an expanded target population of adult male NASH patients. Specifically, the FDA waived the limitation of only testing LPCN 1144 in NASH subjects with total testosterone levels below 300 ng/dL (threshold for hypogonadism).

Current Status

We have recently completed the LiFT Phase 2 clinical study in confirmed non-cirrhotic NASH subjects. The LiFT clinical study was a prospective, multi-center, randomized, double-blind, placebo-controlled multiple-arm study in biopsy-confirmed hypogonadal or eugonadal male NASH subjects with grade F1/F3 fibrosis and a NAFLD Activity Score ? 4 with a 36-week treatment period. The LiFT clinical study enrolled 56 biopsy confirmed NASH male subjects. Subjects were randomized 1:1:1 to one of three arms (Treatment A is a twice daily oral dose of 142 mg testosterone equivalent, Treatment B is a twice daily oral dose of 142 mg testosterone equivalent formulated with 217 mg of d-alpha tocopherol equivalent, and the third arm is twice daily matching placebo).

The primary endpoint of the LiFT clinical study was change in hepatic fat fraction via MRI-PDFF and exploratory liver fat/marker end points post 12 weeks of treatment. Additionally, key secondary endpoints post 36 weeks of treatment included assessment of histological change for NASH resolution and/or fibrosis improvement as well as liver fat data. The LiFT clinical study was not powered to assess statistical significance of any of the secondary endpoints. Other important endpoints included the following: change in liver injury markers, anthropomorphic measurements, lipids, insulin resistance and inflammatory/fibrosis markers; as well as patient reported outcomes.

Additionally, subjects have access to LPCN 1144 through an OLE study. The extension study will enable the collection of additional data on LPCN 1144 for up to a total of 72 weeks of therapy. The OLE is currently on-going and has enrolled 25 subjects. We expect topline results from the OLE study mid-2022.

Treatments with LPCN 1144 post 12 weeks of treatment resulted in robust liver fat reduction, assessed by MRI-PDFF, and showed improvement of liver injury markers with no observed tolerability issues. Inclusion of d-alpha tocopherol formulated with the testosterone prodrug resulted in additional liver benefits, notably improved key liver markers without compromising tolerability.

Key results are presented in the following tables:

Mean absolute liver fat using MRI-PDFF in all subjects (n=56)* at Week 12.







                              Change from baseline (CBL)           Placebo-adjusted CBL
           Treatment           %                p-value              %            p value
        A (n = 18)             -7.7               <0.0001            -6.1          0.0001
        B (n = 19)             -9.2               <0.0001            -7.5          <0.0001
        Placebo (n = 19)       -1.7                 NS               n/a             n/a
        


* Missing data was obtained using Multiple Imputation

NS: Not significant (p > 0.05)

Mean relative liver fat using MRI-PDFF at Week 12 in subjects (n=52) with liver fat ? 5% at baseline.*







                               Change from baseline (CBL)           Placebo-adjusted CBL
        Treatment               %                 p value             %            p value
        A (n = 17)              -40.0              <0.0001            -30.0         0.0002
        B (n = 17)              -46.9              <0.0001            -37.0         <0.0001
        Placebo (n = 18)        -9.9                  NS               n/a            n/a
        


* Based on available data.







        Responders with > 30% Relative Reduction in Liver Fat at Week 12, Intent to
        Treat Dataset (n=56)*.
                              Responder       p value
           Treatment       (% of subjects)   vs Placebo
        A (n = 18)              66.7           0.0058
        B (n = 19)              63.2           0.0026
        Placebo (n = 19)        15.8
        


* Subjects with missing data are considered non-responders

Liver biopsies were performed at baseline ("BL") and after 36 weeks of treatment ("EOS"). Prespecified biopsy analyses included NASH Clinical Research Network ("CRN") scoring as well as a continuous paired ("Paired Technique") and digital technique ("Digital Technique-Fibronest"). All biopsy analyses were performed on the same slides and the reads for the three techniques were done independently. Analysis sets included the NASH Resolution Set (all subjects that have BL and EOS biopsy with NASH at BL [NAS ?4 with lobular inflammation score ? 1 and hepatocyte ballooning score ?1 at BL] (n=37)), the Biopsy Set (all subjects with baseline and EOS biopsies (n=44)), and the Safety Set (all randomized subjects (n=56)).

Both LPCN 1144 treatment arms met with statistical significance the pre-specified accelerated approval regulatory endpoint of NASH resolution with no worsening of fibrosis based on NASH CRN scoring. Additionally, both treatment arms showed substantial improvement of the observed NASH activity in steatosis, inflammation and ballooning.

Key results are presented in the following table:







        Histology NASH CRN Scoring Outcomes1
                                               Placebo           Treatment          Treatment
                                               (n = 11)           A (n=13)           B (n=13)
        . . .
        


Nov 10, 2021

COMTEX_396662414/2041/2021-11-10T08:03:37

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